President Bronislaw Komorowski signed the amended public finance law reducing Poland's debt-to-GDP thresholds that cap budget spending growth following a notable reduction in debt stemming from a recent reform of the pension system, the Presidential Chancellery said on Monday.

The Polish government decided to reduce the thresholds for the spending rule by the 7 pps of GDP gained when it cancelled the Treasury bond portfolios taken from privately managed pension funds at end-January. That move had reduced public debt by some 7.6% of forecast 2014 GDP.

The new thresholds for the spending rule are for public debt at 43% and 48% of GDP.

The government introduced the spending rule back in 2013 to make its precautionary fiscal rules more anticyclical. The spending rule defines caps on budget spending based on previous year's spending and a combination of 8-year rolling average GDP growth rates and inflation forecast for the next year.

Polish public finance law additionally has specific austerity measures warranted once public debt exceeds 55% of GDP. Poland also has a constitutional ban on new borrowing once debt to GDP exceeds 60%. VAT rate hikes are also automatically tied to fiscal conditions.